Plain talking when the CEO moves on
Boards in the US are faster than ever to fire executives accused of misconduct, and more likely to be clear about the reasons, say two new studies.
About 470 high-profile executives and employees have been accused of harassment or other wrongdoing during the past 18 months, according to a tally updated daily by crisis consultant Temin & Co.
The time between the first public report of an executive’s alleged misdeeds and a company announcement of a subsequent dismissal is down to just over two weeks on average this year, compared with six weeks last year, according to Temin.
“Boards are putting tighter boundaries around what is acceptable and what behaviour is unacceptable, acting on that and making it more public,” said Bryan Tayan, a researcher for the Corporate Governance Research Initiative at the Stanford University Graduate School of Business.
Moreover, companies are getting bolder about saying why a CEO is leaving. Of the executives who left Russell 3000 companies this year, eight have been ousted with a specific reference to misconduct, compared with just one in all last year, found a separate analysis by Exechange.com, a group which tracks CEO departures.
The website’s founder is Daniel Schauber, an editor at German finance newspaper Borsen-Zeitung who became frustrated with corporate-speak when it came to reporting about a CEO who was “stepping down”. Schauber developed a system that scores executive departures on a scale of zero, where they clearly left of their own volition, to 10, where they were clearly fired. The average score on his scale has been greater than a five for eight months in a row, he said.
“It seems to be something like a snowball effect,” he said, citing an increase in explicit board language in the past year.
Michael Adams, a professor at Indiana University who teaches a class on language in management, said the increasing clarity with which companies announce executive departures was a tectonic shift in corporate culture.
“The fact that people are suddenly being honest is the unexpected thing,” Adams said.